By KEVIN PROFT/ecoRI News staff
Gov. Gina Raimondo’s Green Bank idea could complement existing
Rhode Island renewable-energy and energy-efficiency programs, or it could lead
to their demise.
The state’s new governor has acknowledged that Rhode Island and
its economy face serious threats from climate change. Tourism will be hurt by
eroding beaches; fisherman will suffer from declining fish stocks; farmers will
struggle with less predictable growing conditions, according to her campaign website.
Despite these concerns, Raimondo sees opportunity. “Better
protecting the environment is not only the right thing to do, it is an economic
driver” that can create jobs, according to the website.
To harness the economic opportunities of mitigating and adapting
to a changing climate, the governor plans to create the Rhode Island Green Bank
and Clean Energy Finance Authority (Green Bank).
ecoRI News contacted
Raimondo’s office for details about the Green Bank idea she proposed while
campaigning for governor but received no relevant responses.
The bank would leverage public funds to attract private
investment, and consolidate efforts to become a “one-stop shop” for
renewable-energy and energy-efficiency projects. Her idea promises “low-cost,
100 percent loans for energy efficiency projects.”
Raimondo’s Green Bank proposal also includes the Adaptation and
Resiliency Revolving Fund, which would provide resources such as low-interest
loans to municipalities so they could better adapt to climate change.
“We need to give (municipalities) the support they need to improve
their stormwater drainage systems, protect their coastal properties, prevent
erosion and more,” according to the website.
Legislation to create a Green Bank in Rhode Island is expected
during the current General Assembly session.
Funding debate
The Green Bank would be a quasi-public corporation with a government-appointed public board. This means the Green Bank would be created by the state to do the state’s work, but wouldn’t be a government department and would have its own budget outside of the state’s budget. According to Raimondo, this would “allow for greater flexibility and autonomy, while reducing risk for Rhode Island taxpayers.”
A Green Bank can receive initial funding from several public
sources, according to the Coalition for Green Capital, a Washington,
D.C.-based organization that advocates for green banks. In Connecticut and New
York, existing surcharges on utility bills and Regional
Greenhouse Gas Initiative (RGGI) funds were repurposed to
provide initial capital for green banks. A state can also issue bonds to private
investors or receive money from private foundations.
The Coalition for Green Capital doesn’t advise new state budget
appropriations, unless it appears clearly feasible in a particular state.
According to Raimondo’s website, Rhode Island’s Green Bank would
be funded by consolidating existing resources, “including, but not limited to:
proceeds from bonds, revenue from the Regional Greenhouse Gas Initiative
allowances, existing assets in the Renewable Energy Fund and the existing
surcharge on Rhode Island electricity customers’ bills.”
Here's the main source of concern
This proposed funding strategy has alarmed many in Rhode Island’s
environmental community.
At its January meeting, the Environment Council of
Rhode Island (ECRI), a coalition of more than 60 environmental groups, preemptively
adopted an official position, stating,
“While ECRI recognizes the benefits and importance of providing sustainable
funding for (environmentally beneficial infrastructure projects), ECRI is
strongly opposed to re-directing existing moneys from existing, highly
successful, energy programs in order to fund any possible Green Bank.”
The funds Raimondo has suggested diverting into the Green Bank
already serve specific purposes that they have effectively fulfilled, according
to ECRI. For example, the “existing assets in the Renewable Energy Fund” being
eyed by Raimondo are a crucial part of one of Rhode Island’s most successful
renewable-energy laws, the Renewable Energy Standard.
The Renewable Energy Standard (RES) is made up of three
interdependent features. First, a mandate requires Rhode Island’s utility
company, National Grid, to annually buy a certain percentage of its electricity
from renewable-energy sources. The percentage increases over time and will
reach 16 percent in 2019.
Second, renewable-energy generators, such as the owner of a wind
farm, create one renewable energy certificate (REC) for every megawatt-hour of
energy generated. National Grid must buy enough RECs each year to satisfy its
renewable-energy mandate. Since renewable-energy generators sell both their
energy and RECs, RECs create a financial incentive for renewable generation.
Third, in years when there isn’t enough renewable energy generated
for National Grid to meet its renewable-energy obligation, it does so by
instead making alternative compliance payments (ACPs) to the Renewable Energy
Fund (REF). The REF then funds new renewable-energy projects, to reduce or
eliminate a renewable-energy shortfall in future years.
According to ECRI, the Renewable Energy Standard works exactly as
intended, and removing any of its three parts would cause the system to
collapse. If the Renewable Energy Fund is diverted to a Green Bank, for
example, the Renewable Energy Standard would no longer have a mechanism to
foster new renewable-energy generation when shortfalls occur.
ECRI also specifically opposes redirecting RGGI auction proceeds —
money generated from the regional cap-and-trade program Rhode Island
participates in — and the existing energy-efficiency program surcharge from
electricity bills to a Green Bank.
Both funding sources have historically gone toward rebates,
financial incentives and technical assistance that help residents and
businesses make energy-efficiency improvements, which help Rhode Island’s
economy and save ratepayers money on their energy bills, according to ECRI.
Rhode Island ranks third nationally in overall energy efficiency
because of its current programs, according to Abigail Anthony, director of the
Acadia Center’s Rhode Island office.
“Rhode Island’s nation-leading energy-efficiency programs and
their integrated financing are achieving unprecedented levels of cost-effective
energy savings and reaching the vast majority of Rhode Islanders,” she said.
Anthony noted that Rhode Island’s current energy-efficiency
programs already leverage private funding without a green bank. For example,
Rhode Island’s natural-gas customers are eligible for a 50 percent rebate off
the cost of insulating their homes, but private capital is required to fund the
remainder of the project.
Anthony fears that the proposed Green Bank would transform Rhode
Island from a state that offers residents and businesses a proven combination
of energy-efficiency rebates, financial incentives, technical assistance and
some loans to one that focuses overwhelmingly on loans and financing. She said
residents and businesses are often unwilling to take on loans to pursue
energy-efficiency projects, citing cases in Britain and in Cambridge, Mass.,
where such an approach failed.
“Loans must be part a larger toolbox,” she said. “Acadia
Center recommends that rather than compromise what is working,
(the Green Bank should offer) additional financing to enhance our comprehensive
energy-efficiency programs and make energy efficiency even easier and more
accessible for Rhode Island residents and businesses.”
According to ECRI, Raimondo’s proposed funding mechanism would
risk harming, or even destroying, important and successful renewable-energy and
energy-efficiency programs.
Jerry Elmer, senior attorney of the Conservation Law Foundation,
said, “The important thing with any green bank proposal is to find new,
dedicated funds, rather than cannibalize existing revenue streams that are
accomplishing their purpose.”
Despite its reservations about the possible funding mechanisms for
the proposed Green Bank, ECRI currently takes no position regarding the general
merits of creating one in Rhode Island.
Connecticut Green Bank
In 2011, the Nutmeg State established the Clean Energy Finance and Investment Authority (CEFIA), the nation’s first Green Bank. CEFIA leverages public funds to attract private investment, with the goal of scaling up renewable-energy use in the state. It offers incentives and low-cost loans to encourage homeowners, companies, municipalities and institutions to support renewable energy and energy efficiency.
“The idea was to transition the clean energy market to one that
would become self-sustaining rather than rely indefinitely on public sources of
funds,” Bryan Garcia, CEFIA’s president, wrote in the agency’s 2013 annual
report.
The report highlights the successes of Connecticut’s Green Bank,
including more than $220 million invested in renewable energy, a $1 to $10
public-to-private investment ratio, the creation of 1,200 jobs and a reduction
of more than 250,000 tons of greenhouse-gas emissions.
In Bridgeport, CEFIA helped redevelop a brownfield site into the
second-largest fuel-cell power plant in the world; $5.8 million in ratepayer
funds leveraged a lifecycle investment of $125 million of private investment
from Dominion, one of the country’s largest energy companies. The 14.9-megawatt
plant supplies 15,000 homes with low-carbon energy.
Rooftop solar installations doubled in 2013 compared to previous
years, thanks in part to CEFIA’s Residential Solar Investment Program, which
provides rebates and performance-based incentives that make installing solar
more affordable to homeowners. In 2011, Connecticut committed to installing 30
megawatts of new solar power within 10 years. Two years later, it had already
achieved more than half that amount through 2,300 different projects.
CEFIA provides banks with loan-loss reserves to increase their
ability to make long-term, low-interest energy-improvement loans to eligible
homeowners. Homeowners can use these loans on insulation, heating and cooling
equipment, window upgrades or the installation of a renewable-energy system.
Jamie Howland, director of the Climate and Energy Analysis Center
for the Acadia Center in Hartford, was more cautious than the government’s
annual report when he assessed the state's Green Bank. Only an independent,
third-party evaluation will be able to measure its success, according to
Howland.
Howland said the expansion in renewable-energy and
energy-efficiency projects in Connecticut since the implementation of the Green
Bank must be compared to the expansion that would have occurred had the Green
Bank never been created.
“We need to know that the loans (from the Green Bank) aren’t
simply going to projects that would have happened anyway,” he said. The
Green Bank should only receive recognition for projects that wouldn't have
happened without it, he added.
“It’s likely that there has been some expansion due to the Green
Bank’s programs, but we do not have any idea of the scale of that impact as
compared to the resources that have been invested,” Howland said.
Like in Rhode Island, the initial proposal for Connecticut's Green
Bank threatened to divert all existing funding from energy-efficiency programs
and from renewable-energy incentive programs to the Green Bank. The state's
environmental community, including Acadia Center, advocated against this
strategy, which would have emphasized loans over incentives.
“The key to successful efficiency programs is to address all of
the barriers keeping customers from implementing efficiency projects. (Loans) are
only one component of a successful efficiency effort,” Howland said.
“Fortunately, the existing efficiency programs were retained and later had
their funding expanded."
Connecticut's Green Bank has proposed expanding funding for
rebates for solar installations. Howland said this is a sign that state
officials recognize the importance of incentives “as a key part of the full
suite of comprehensive program offerings.”
Currently, the Green Bank only offers loans for energy-efficiency
projects, but customer projects often end up bundling Green Bank loans with
rebates from other government programs, according to Howland. About half of the
efficiency loans provided by the Green Bank are only legally possible because
rebates allow the projects to meet statutory payback requirements.
Going green
Abel Collins, a volunteer who represents the Sierra Club of Rhode Island on policy issues, said a wisely funded, administered and marketed Green Bank could multiply the money available for renewable-energy and energy-efficiency projects in Rhode Island. His preferred model for a green bank is Hawaii’s Green Energy Market Securitization (GEMS) program.
This program enables renewable-energy and energy-efficiency
programs through low-cost loans. Funding for GEMS comes from part of an
existing surcharge on ratepayer utility bills and the private capital those
funds leverage. Customers, mainly homeowners, renters and nonprofits, repay loans
either directly or over time through energy savings on their electricity bills.
Both repayment methods result in lower electricity costs, compared
to what customers paid prior to installing their energy-improvement projects.
Customer repayments are used by GEMS to fund additional energy projects, making
the program self-sustaining.
Eugenia Marks, senior director of policy at the Audubon Society of
Rhode Island, said a Green Bank would be a useful addition to implement
environmental projects with a public benefit. Rather than repurpose existing
money, such as the Renewable Energy Fund, to capitalize the bank, she advocates
for a new fee, spread across the entire residential base.
Marks said a Green Bank in Rhode Island could offer loans and
grants to support the state’s ongoing effort to phaseout cesspools, better
manage stormwater runoff, protect drinking-water supplies, and support small
municipal environmental projects such as sidewalk continuity and repair and
other projects that encourage non-fossil-fuel-based transportation.
“A Green Bank should have a loan review commission whose members
have professional expertise in finance, environmental engineering,
environmental law, municipal liaison, comprehensive environmental issues, and
community development,” she said.
Marks also said applicants for Green Bank loans or grants should
need to be able to prove their ability to deliver on their proposal and
demonstrate its public benefit. The bank also should focus on specific
environmental challenges determined by directors of the Department of
Environmental Management, Commerce, Coastal Resource Management Council, Office
of Energy Resources, Department of Transportation and the Rhode Island Public
Transit Authority.
Charity Pennock, the Rhode Island representative for the New
England Clean Energy Council, said NECEC supports Rhode Island
exploring the creation of a Green Bank as a way to help reduce the cost of
energy-efficiency and renewable-energy projects for consumers. She said the
Ocean State should reference the experiences of Connecticut and New York when
crafting its own Green Bank proposal.
“There is nothing wrong with the idea of a Green Bank, but how you
do it matters,” Elmer said. The CLF attorney said ECRI would likely support a
Green Bank proposal if it were funded by new, sustainable streams of revenue.